Prince Andrew was reportedly in tears when told the Queen had stripped him of his military affiliations and royal patronages.
Buckingham Palace released a statement on Friday, just a day after a US judge ruled the Duke of York must face sex abuse claims.
"The Duke of York will continue not to undertake any public duties and is defending this case as a private citizen," the statement said.
The prince also will no longer use the style "His Royal Highness".
UK media outlet the Mirror reported that the prince was left devastated and felt he had let a lot of people down upon hearing the news.
"The Prince was tearful when told the news even though he had expected it," a senior defence source told the Mirror.
"He feels that he has let so many people down, not least his mother, during her Platinum Jubilee year."
The source said that Prince Andrew's demotion had been received positively from top members of the armed forces, who described him as "a bloody embarrassment".
"Andrew is a victim of very poor decision-making. There is no way he could continue as the honorary head of distinguished military regiments," the source said.
"His departure has been greeted with a huge sigh of relief. He had become a bloody embarrassment."
The demotion comes as Virginia Giuffre alleges Prince Andrew sexually assaulted her at the age of 17. She says this occurred after she was trafficked by Jeffrey Epstein and Ghislaine Maxwell.
The prince has consistently denied the allegations, including in an infamous 2019 interview in which one of his defences was a claim he cannot sweat.
"He had hoped that he might get some sort of stay of execution and be allowed to clear his name before his titles were removed," the source for the Mirror said.
"There are a number of people in the royal household who are utterly convinced that he is innocent.
"But the clamour for Andrew's scalp meant that a quick and brutal decision needed to be made."
